Qwest boosts offer for MCI
DENVER — MCI Inc. directors face sharpened pressure to reverse course in their choice of suitors as Qwest Communications has again sweetened its offer to $9.7 billion in cash and stock — more than $2 billion above a rival offer from Verizon.
Qwest upped the ante with its “best and final” offer on Thursday, giving MCI’s board two days to think it over.
The offer, $30 per share, is about 30 percent more than a buyout deal MCI has accepted from Verizon Communications Inc.
MCI directors have already rejected Qwest three times, pointing to its heavy debt and worries over the long-term value of Qwest shares.
Elliott Associates LP, a hedge fund that holds about 3.5 percent of MCI’s stock, said Friday it supports the new Qwest bid, noting it was higher than the price Verizon paid recently for a 13 percent stake in MCI.
“The new $30 offer by Qwest is clearly superior, and MCI should do the right thing and declare it a superior offer,” the company said in a statement.
The Qwest bid consists of $16 a share in cash, an increase of $2.50 backed in part by $800 million in commitments from MCI shareholders, Qwest Chief Executive Dick Notebaert said in a statement. Those shareholders who would contribute own more than 13 percent of MCI’s stock, Qwest said.
Legg Mason Capital Management, which controls 1.7 percent of MCI’s stock and 13.2 percent of Qwest’s shares, confirmed it is providing some of the $800 million, but declined to disclose the amount. Legg Mason Chief Investment Officer Bill Miller was unavailable for comment.
The remaining $14 of Qwest’s bid would be paid in Qwest stock, based on an exchange ratio of 3.373 Qwest shares per MCI share. The new offer also includes a previous guarantee to increase the exchange ratio should Qwest’s share price fall by the time the proposed deal closes.
It also includes an additional $1 billion in committed financing to ease concerns about whether the combined company would have the financial resources to compete, Notebaert said in a letter to MCI’s board.
The latest bid, described as Qwest’s “best and final,” will be withdrawn if MCI does not declare it superior and communicate that to Verizon by Saturday afternoon, he said.
“We are confident that this revised proposal fulfills the MCI board’s description on April 5 of an offer it was prepared to find a superior proposal,” Notebaert said.